NJ Considers Allowing Nonprofits to Spend Below Endowment Original Values

Newsday reports that the New Jersey state legislature is considering relaxing restrictions on nonprofit endowment spending.  As is the case in many states, New Jersey law generally prohibits nonprofits from spending donated endowment funds if doing so would reduce a particular fund below the dollar amount originally contributed by the donor or donors to that fund.  While not usually a concern in times of growing endowments, the recent market downturns means that many endowment funds are below that original amount and so must cease spending until such time as they recover.  While not stated in the article, it appears that the state legislature is considering replacing the “historic dollar value” restriction found in section 2 of the Uniform Management of Institutional Funds Act (UMIFA) and adopted by almost every state with the more flexible standard provided by section 4 of the Uniform Prudent Management of Institutional Funds Act (UPMIFA) proposed in 2006 and adopted by many states since then.

LHM